Student Debt Delinquency: Hedge Funds Are Dumping These Education Stocks
Student loan delinquency reached $85 billion in the third quarter of 2011, reports Bloomberg. That's a shocking 10% of the outstanding balance of student loans.
There are 37 million borrowers of student loans and approximately $867 billion in outstanding federal and private debt. 5.4 million, or 14%, have at least one past-due student loan account, according to a Monday report posted on the Federal Reserve Bank of New York's website.
This figure does not count students within the six-month grace period after they graduate, or those who have taken the opportunity to defer payment with interest. Bloomberg writes, "As a group, these people owed as much as or more in the third quarter than in the second, according to the report."
Since the temporarily exempt group is so large, many speculate the delinquent loan rate is much higher than the quoted 14%.
Business section: Investing ideas
The enormity of the student loan debt has been capturing headlines for some time, laced with speculation of it ever being paid off. That's bad news for schools largely populated by students using federal student loans to pay tuition fees.
For that reason, we wanted to find U.S. education stocks whose performance could be affected by the delinquency trend.
For ideas, we collected data on institutional money flows, and identified a list of educational stocks that have seen significant outflows over the current quarter.
Institutional investors think these education stocks are in trouble. Will rising student debts drag them down further? (Click here to access free, interactive tools to analyze these ideas.)
1. Career Education (NAS: CECO) : Provides educational services primarily in the United States. Net institutional sales in the current quarter at -11.9M shares, which represents about 20.19% of the company's float of 58.93M shares.
2. Capella Education (NAS: CPLA) : Provides online postsecondary education services in the United States. Net institutional sales in the current quarter at -705.1K shares, which represents about 5.71% of the company's float of 12.35M shares.
3. China Distance Education Holdings: Provides online education and test preparation courses, and other related services and products. Net institutional sales in the current quarter at -209.4K shares, which represents about 14.64% of the company's float of 1.43M shares.
4. Education Management (NAS: EDMC) : Provides post-secondary education in North America. Net institutional sales in the current quarter at -2.1M shares, which represents about 10.79% of the company's float of 19.47M shares.
5. The Washington Post Company (NYS: WPO) : Operates as a diversified education and media company in the United States and internationally. Net institutional sales in the current quarter at -310.4K shares, which represents about 6.73% of the company's float of 4.61M shares.
6. Xueda Education Group (NYS: XUE) : Xueda Education Group provider of tutoring services for primary and secondary school students in China with a focus on offering personalized tutoring services. Net institutional sales in the current quarter at -1.2M shares, which represents about 4.97% of the company's float of 24.15M shares.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above.
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